Auto insurance coverage come in a variety of types, and what you pay for determines how much coverage you have in the event you are involved in an auto accident. Understanding the differences in coverage you can purchase and have purchased is essential if you want to be properly insured and to understand what exactly you are insured for. The following is a basic guide to help get you started:
Types of Auto Insurance Coverage
Bodily Injury Liability (BI)
Covers physical harm (including death) caused by you to another person (i.e. you caused the accident). This coverage is meant to protect you if someone decides to file a personal injury claim against you. In California, the minimum limits are $15,000 per person and $30,000 per accident. What this means is if you were to cause harm to someone else, the maximum your insurance would pay is $15,000 for each person you harm, but no more than $30,000 total for all the victims of the accident. In situations where there are multiple passengers and/or victims to an accident, their damages are prorated and calculated by the insurance company based on their medical bills and treatment. In serious accidents, this amount may not be sufficient and where the injuries are aggravated – this may expose your personal assets. As such, it is important to protect your assets if you have any by buying higher bodily injury coverage. Coverage can range from $15,000 (per person)/$30,000(aggregate per accident); $25,000/$50,000; $100,000/$300,000, or even higher. Some coverages are available for $250,000 per person and even up to $1,000,000 per accident.
Property Damage (PD)
Designed to cover damage you might inflict to someone else’s property. The property may be someone else’s vehicle, but could include other items, like fences, fire hydrants, houses, etc. This coverage is meant to protect you if someone decides to file a property damage claim against you.
Collision Coverage (COLL)
Protects your car if it is damaged by another vehicle or object. Usually, this coverage is not required by the state, but can be required if your vehicle has been financed through a lending agency, or is leased.
Comprehensive Coverage (COMP)
Also known as “Other than Collision” (OTC), this insures your vehicle and, to a limited extent, other vehicles you may be driving from losses resulting from circumstances other than collisions. Common circumstances include: damage from flooding, fire, vehicle theft, etc. This coverage also protects you if vehicle is stolen. This coverage is usually required if you are financing or leasing your car.
Medical Payments (Med Pay)
Medical payments coverage typically referred to as “Med Pay” provides some coverage for medical payments made in connection with medical treatment received. This is paid by your insurance company when there is coverage. However, it is reimbursable if there is a settlement against the defendant’s insurance company. This coverage is typically sold in increments of $1,000 or $5,000.
Uninsured Motorist Bodily Injury (UMBI)
If you are involved in an accident with an uninsured driver, this will cover you, your passengers, other drivers on the policy and unlicensed members of your household. It provides you with protection in the event you are injured in an accident that was not your fault and the at-fault party does not have auto insurance. It also covers you if you are involved in a hit-and-run accident (provided you obtain a police report).
Underinsured Motorist Bodily Injury (UIM)
This policy covers the same individuals as the above (UMBI) for accidents that are not their fault. This policy applies when the party who caused your accident has insurance, but the bodily injury limits are not sufficient to fully compensate you for your injuries. For example, if you have losses of $35,000 and the other side has insurance that pays only $25,000 per person, then they would not be able to fully compensate you for your losses. If you have UIM-BI coverage through your own insurance company in excess of the defendant’s coverage of the stated example of $25,000, then you would be able to pursue the excess from your own insurance company. The excess or difference would be $10,000 in this case.
Uninsured Motorist Property Damage (UMPD)
Covers property damage to your vehicle sustained by an uninsured driver.
While these coverages are not required, they can save you a lot of money in the long run. These coverages are typically very cheap, and if you get a sufficient amount of coverage, it can protect you and your loved ones from being financially responsible for any injuries you or they sustain.
Deciding on Deductibles
Typically speaking, the higher the out-of-pocket deductible (what you pay), the less your monthly insurance payments; and the higher your monthly insurance payments, the greater the deductible. When picking insurance, be sure to factor in how much out-of-pocket costs you can afford if you are involved in an accident.
Look at Insurance Limits
What insurance you choose determines the extent of your coverage. For instance, you might inflict damage to someone else’s property that far exceeds the amount of coverage you possess. In such a scenario, you will have to pay the difference. Though it’s hard to anticipate your future needs, be sure to pay for as much coverage as you can reasonably afford. Doing so can save your wallet some future heartache.
Most states have strict laws requiring you to carry some form of auto insurance. If you are not insured, you could be one accident away from having your life and finances ruined. Having insurance means you can drive with a greater peace of mind.
If you have been injured in an auto accident and have questions regarding your automobile insurance policy, call us today.